We are looking to upgrade homes as it is too small for our family (5 people, 1800 sq ft). Options are either to rebuild on our lot or buy a bigger home outside of the city. Renovation is a band-aid solution as we want ~3k sq ft. I don’t want to tear down our house and lose the equity we have in it (house is in good shape, built in 1970) and I don’t want to leave our 3% interest rate and buy a new home at 8%. We’ve been staying on the ‘stay put’ option for too long.
We talk to realtors who say ‘sell’ and contractors who say ‘rebuild’…some unbiased advice from the boards would be much appreciated and I would imagine others are in a similar spot.
Realtors sell. Contractors build. Sounds like both are staying on message and in their respective lanes. As you noted the sell this and buy that is a matter of finances. Finance bros on here can better advise you on that.
The build more here option has a lot of "it depends."
What functional areas do you want in the new space? Bedroom(s)? bath(s)? Kitchen? Recreation room/common space? Is your current house design such that it would be reasonable to get functional traffic flow to the addition? I'm guessing that your biggest need for space is more bedrooms, like going from three to four or five with one or two or three more bathrooms. Some DIY design work will clarify your space needs. Also, a rough design will make discussions with architects, builders and structural engineers much more productive.
Do you currently have a basement? Do you want one under the new construction? Even if you don't have a basement under the existing, it could be put under the new space. Can it be done where you are?
I would download a freeby CAD software package, draw up your current house footprint and then draw up a bunch of possible additions. If you're old fashioned, use graph paper and pencil.
Do you have enough buildable space on your lot? Take some rope or garden hose and lay out the space next to your house. 30 x 40 rectangle or something like that to get the 1200. Is there anything (like septic system, well, sewer etc) in that rectangle? Is it flat enough, or can it be made flat enough for building? Are there legal restrictions on size of house on your piece of ground? Setback requirements?
In some neighborhoods near me, people have bought houses, ripped off the back wall completely and then build an addition that is as big to 3 times bigger than the original house. These houses were unoccupied during construction. Do you have alternative living space for times when your house or at least significant parts of it are unoccupied?
Could you go up instead of out? That is, literally raise the roof and put on a second story, either full or partial? A structural engineer would need to evaluate the condition of your current house with respect to its ability to support construction of additional occupied space above. or possible combination. Add partial second story with a two story addition to get the necessary space.
Are you willing and able to put up with massive disruption of your house for a year (less if you're lucky.)
Do you plan to do the general contractor part yourself, or do you plan to hire a GC and have the GC find all the necessary subcontractors, deal with scheduling, permitting, fees etc.?
Paying for new construction is yet another consideration. Short term construction loans rarely come cheap. Then they need to be covered eventually by a long term mortgage. (HELOC available to you?) $130 - $160 per square foot plus etceteras is construction cost near me, so $150,000to $200,000 for your 1200 sq ft addition. Figure you might need to cover $250,000. It is rare that construction comes in on or under budget. How would that work as an addition to your house cost in your neighborhood? There are websites that allow you to do ball park construction cost estimates based on your location.